State spending to underpin growth

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‘Will play a pivotal role’ in Q4 – Sec. Abad

Public spending will further improve in the fourth quarter, a Cabinet official claimed on Friday, in the process boosting full-year economic growth to 6 percent.

The run-up to next year’s national elections and incentives under a proposed salary standardization law will provide added spurs, Budget Secretary Florencio Abad said.

“We have now the momentum after a slow start in the first quarter at 5 percent, recovery in the second quarter at 5.8 percent, and sustained growth in the third quarter,” Abad said in a statement issued a day after the government reported that July-September gross domestic product (GDP) growth had picked up to 6 percent.


“It’s still possible to grow at 6 percent for the whole year of 2015,” he added.

“As in the third quarter, public spending will once again play a pivotal role in the economic expansion in the fourth quarter. Historically, the fourth quarter has always been a strong quarter in terms of public spending as agencies rush to finish their projects.”

Abad said the elimation of the special allotment release order (SARO) requirement, among other reforms, had increased the contribution of state spending to economic growth.

“Because of the reforms introduced, like the elimination of the need for SAROs, the significant    reduction of lump sums and the advance procurement of goods and services, the DBM (Department of Budget and Management) is certain to match its yearly average of 98 percent releases,” Abad said.

Fund releases previously required the issuance of SAROs by the Budget department. This was abolished last year with the adoption of the budget-as-release-document policy, aimed at streamlining and facilitating the use of government funds.

The Aquino administration, which has pushed infrastructure development as a means of growing the economy, has been criticized for not supporting this policy by spending enough. Roadblocks have included the Supreme Court’s rejecting a budget reallocation program as unconstitutional but on the whole the bottlenecks are institutional, officials have admitted.

Underspending was again noted as the culprit for the first semester’s lackluster growth, which was well below the government’s full-year target of 7 percent to 8 percent. Officials have vowed improvements but admit that full-year GDP growth will likely fall around 6 percent.

On Thursday, Socioeconomic Planning Secretary Arsenio Balisacan said significant improvements in government spending and household consumption were the domestic demand-led third quarter growth.

In particular, he noted that government final consumption expenditure had increased to 17.4 percent from 3.9 percent in an indication that the spending bottlenecks were being overcome.

Balisacan also pointed out that both public and private sector investments remained strong as capital formation rose by 8.9 percent, a reversal of the 0.2-percent contraction seen in the same period last year.

As for the national budget, the government has reported that 96 percent of allocations for the year were released as of end-September.

Abad said he was optimistic that government spending would improve moving forward, noting the motivating power of wanting to remain in public office and the promise of bonuses.

“Government executives will even be motivated to improve performance further as the proposed SSL (Salary Standardization Law) 2015, which, according to both houses of Congress, is certain to pass this year. This will double their performance-based bonuses next year,” he said.

President Benigno Aquino 3rd earlier this month endorsed the proposed law to Congress.
It entails a P225.8-billion budget and will hike the salaries of 1.53 million government workers over the next four years.

“What will further boost spending,” Abad continued, “is the pressure to finish infrastructure projects from political leaders in the run up to the May 2016 elections.”

“Performance is always an election platform and political leaders demonstrate that through the delivery of social services and public works projects.”

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